By RM VishakhaIn context of financial instruments, commonly used phrase having your cake and eating it too goes well with ULIPs or Unit-Linked Insurance Plans.When we think of risks, we only associate with physical risks (death, disability, critical illness).
The risks of market volatility and lack of financial discipline are real, significant, and often, unacknowledged.
ULIPs allow for management of all these three risks due to insurance cover, policy lock-in (to prevent impulse spends from funds put aside for long-term needs) and investment options of automatic profit bookings, fund options and fund switching provisions.The smartphone is perhaps a good anecdotal comparison, to explain how ULIPs extend themselves to multiple objectives of financial planning and risk management.
Akin to smartphone, that incorporates several capabilities into a nifty, handheld device with a built-in camera, utility applications to book cabs, online wallets etc., ULIPs too pack in a host of benefits for its customers.The multifaceted ULIP allows for flexibility of investment, based on return expectations and risk appetite.
One can invest in debt or equity or simply schedule investments to shift between two, depending on age or return triggers, as per ones tailored preferences.
ULIPs in-built aspect is life insurance cover.
The cover is significantly higher than invested amount in initial years, to fit individual life goals.
Eventually, with a built-up corpus, charges for life cover are also exempted, making this a cost-efficient proposition.ULIPs, while helping one stay on financial discipline pathway, gives one option of withdrawal or adding onto corpus over longer term, as well.
ULIPs have an in-built agility to cater to evolving needs of a customer through enabling switches between asset classes to book returns, scheduling systematic withdrawals to supplement income, or enhancing investments during earning years for a given future goal.
This makes plan a holistic partner for life, all through ones financial journey of accumulation, growth and systematic withdrawals.
Further, convenience is unparalleled with cumbersome documentation or tax implications taken out of picture when one buys a ULIP.Since there is aspect of regulated and defined reduction in yield, value for money element is taken care of.
ULIPs coupled with term cover work out cheaper than investing through a mutual fund over longer term.
Besides, an insurance company is inherently wired to maintain its customers financial stability, making it one of more reliable customer investments.While creating plans for life goals, commitment of ULIP provider to stay throughout life of policy is critical.
ULIPs, by virtue of regulation, do not have any call options.
That means plans will be serviced as a promise made for life.It wont be a stretch to refer to ULIP as unacknowledged soldier capable of morphing itself to cater to needs of simplicity, ease, agility, and as a protector against risks.New Year resolutions revolve around sticking to commitments made towards fulfilling cherished goals and dreams.
In tandem with hard work involved in making a lasting and long-term impact, there is an able and supporting aide in ULIP, to structure ones financial plans in a single place while delivering not only value for money, but also peace of mind.(Author is managing director, IndiaFirst Life Insurance)